Marvell Technology Group (MRVL)

Provision for Income Taxes

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Table of Contents

For the three months ended May 2, 2009, we recorded an income tax provision of $2.0 million compared to an income tax provision of $7.8 million for the three months ended May 3, 2008. The effective tax rates are influenced by non-tax-deductible expenses, such as stock-based compensation expense, amortization of acquired intangibles, and accounting for uncertain tax positions in accordance with Financial Accounting Standards Board, or FASB, Interpretation No. 48, “Accounting for Uncertainty in Tax Positions,” or FIN 48. For the three months ended May 2, 2009, the effective tax rate was impacted by a pretax loss which required us to exclude losses in tax jurisdictions for which no benefit would be recognized. For the three months ended May 2, 2009, the provision for income taxes was reduced by $4.3 million because, in several foreign jurisdictions, the statute of limitations lapsed for uncertain tax positions.

Provision for Income Taxes

For the three months ended May 3, 2008 and April 28, 2007, our effective tax rate was an income tax expense of 10.9% and an income tax expense of  (12.7)%, respectively.   The effective tax rates are influenced by non-tax-deductible expenses, such as SFAS 123R stock based compensation expenses, amortization of acquired intangibles, and accounting for uncertain tax benefits under FIN 48.   The April 28, 2007 effective tax rate was also impacted by the pretax loss and the fact that a smaller proportion of profit was earned in low or zero tax jurisdictions.  Also, for the three months ended May 3, 2008, the effective tax rate was reduced slightly by the recognition of certain uncertain tax positions resulting from lapse of a statute of limitations.

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Provision for Income Taxes

        Our effective tax rate was 243% for fiscal 2007 compared to 28% for fiscal 2006. The increase in fiscal 2007 and 2006 effective rates were primarily due to non tax-deductible expenses, mainly stock-based compensation, acquisition related expenses, and charges related to asset impairment resulting in a lower profit before tax in jurisdictions where we are unable to utilize tax benefits. For fiscal 2007 and 2006, the increases of 33.8% and 12.9%, respectively, was directly related to nondeductible officer compensation, penalties and interest expense.

        During fiscal 2006, our German and Israel subsidiaries underwent and completed corporate tax audits of years 1999 through 2002 and years 2001 through 2003, respectively. During fiscal 2005, the Internal Revenue Service (IRS) completed an income tax audit for the fiscal years ended February 1, 2003, February 2, 2002 and January 27, 2001 of our U.S. consolidated return. The audits closed with no material adverse impact on our consolidated financial statements. Since the close of fiscal 2007 the IRS has commenced an audit of the U.S. consolidated returns for the fiscal years 2004, 2005 and 2006. The IRS has focused on stock based compensation and related items.

Provision for Income Taxes

        Our
effective tax rate was 243% for fiscal 2007 compared to 28% for fiscal 2006. The increase in fiscal 2007 and 2006 effective rates were primarily due to non tax-deductible
expenses, mainly stock-based compensation, acquisition related expenses, and charges related to asset impairment resulting in a lower profit before tax in jurisdictions where we are unable to utilize
tax benefits. For
fiscal 2007 and 2006, the increases of 33.8% and 12.9%, respectively, was directly related to nondeductible officer compensation, penalties and interest expense.

        During
fiscal 2006, our German and Israel subsidiaries underwent and completed corporate tax audits of years 1999 through 2002 and years 2001 through 2003, respectively. During fiscal
2005, the Internal Revenue Service (IRS) completed an income tax audit for the fiscal years ended February 1, 2003, February 2, 2002 and January 27, 2001 of our U.S. consolidated
return. The audits closed with no material adverse impact on our consolidated financial statements. Since the close of fiscal 2007 the IRS has commenced an audit of the U.S. consolidated returns for
the fiscal years 2004, 2005 and 2006. The IRS has focused on stock based compensation and related items.

Provision for Income Taxes

Our effective tax rate was approximately (12.7%) and 18.7% for the three months ended April 28, 2007 and April 29, 2006, respectively.  The effective tax rates were affected by non-tax-deductible expenses, such as nondeductible acquisition related expenses, FAS 123R stock based compensation expenses and the accrual of interest and penalties on unrecognized tax benefits.

Provision for Income Taxes

Our effective tax rate was 28% for fiscal 2006 compared to 31% for fiscal 2005. For fiscal 2006 and 2005, the effective rates were affected primarily by non tax-deductible expenses, mainly stock-based compensation, nondeductible acquisition related expenses and nondeductible officer compensation. For fiscal 2006, the increase of 12.9% was directly related to nondeductible officer compensation, penalties and interest expense.

During fiscal 2006, our German and Israeli subsidiaries underwent and completed corporate tax audits of years 1999 through 2002 and years 2001 through 2003, respectively. During fiscal 2005, the IRS completed an income tax audit for the fiscal years ended February 1, 2003, February 2, 2002 and January 27, 2001 of our U.S. consolidated return. The audits closed with no material adverse impact on our consolidated financial statements.

Provision for Income Taxes

Our effective tax rate was 18.8% for the three months ended April 29, 2006 compared to 14.8% for the three months ended April 30, 2005.  The effective tax rates were affected by profits earned in jurisdictions where the tax rate is lower than the U.S. tax rate and by non-tax-deductible expenses, such as stock-based compensation, nondeductible acquisition related expenses and the impact of adopting SFAS 123R.

Provision for Income Taxes

Our effective tax rate was 17.2% for the three months ended April 30, 2006 compared to 12.8% for the three months ended April 30, 2005. The effective tax rates were affected by profits earned in jurisdictions where the tax rate is lower than the U.S. tax rate and by non-tax-deductible expenses, such as stock-based compensation, nondeductible acquisition related expenses and the impact of adopting SFAS 123R.

Provision for Income Taxes

Our effective tax rate was 16.4% for fiscal 2005 compared to 28.2% for fiscal 2004. For fiscal 2005 and 2004 the effective rates were affected primarily by an increase in the proportion of income earned in locations outside the U.S., which was taxed at lower income tax rates as well as by stock-based compensation and non-deductible expenses relating to our acquisitions, which were recorded as a result of using purchase accounting.

On August 26, 2003, the Internal Revenue Service (IRS) began an income tax audit of Marvell Semiconductor, Inc. (MSI), the main U.S. subsidiary of Marvell Technology Group Ltd., for fiscal 2003, 2002 and 2001. The audit was completed in fiscal 2005 with no material adverse impact on our consolidated financial statements.

Provision for Income Taxes

Our effective tax rate was 11.9% and 12.3% for the three and nine months ended October 31, 2005 compared to 14.5% and 18.3% for the three and nine months ended October 31, 2004.  The effective tax rate decreased due to an increase in profits earned in jurisdictions where the tax rate is lower than the U.S. tax rate and a decrease in non tax-deductible expenses or other, such as stock based compensation, nondeductible acquisition related expenses and asset impairment.

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